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Speaker 1: Let's get to our guests now. How Chongwan is Managing

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Speaker 1: director and head of Asian Fixed Income at Principal Asset Management,

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Speaker 1: joining us from Singapore. I was reading an analyst note

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Speaker 1: from Alpha Try and they said it's as if investors

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Speaker 1: came to a haunted house and got handy candy. Excuse me,

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Speaker 1: but once they unwrapped it, they saw it was soggy broccoli.

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Speaker 1: What did you view from j pal? And when do

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Speaker 1: we get the candy rather than the soggy broccoli? We

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Speaker 1: can get away from Halloween, isn't it? Want? Thanks thanks

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Speaker 1: for having me today. I think we got away two

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Speaker 1: things from from Paul yesterday. One is that the peak

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Speaker 1: rates may have to be higher, and two we're bringing

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Speaker 1: the markets back to where it was previously thinking of

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Speaker 1: a past. You can see SPX is now back to

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Speaker 1: where it was on the twenty one October peak rates

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Speaker 1: are now above five and I think the market is

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Speaker 1: taking it very clearly that Paul wants to shift from

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Speaker 1: the pace of tightening to the great Okay, and in

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Speaker 1: terms of getting to that pig right, I mean the

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Speaker 1: other key factor is how much of a downturn do

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Speaker 1: we see? Do we see a global recession your view here,

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Speaker 1: and if there is going to be some kind of recession,

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Speaker 1: how deep is it. I mean, what we're seeing are

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Speaker 1: some signs of soft data that that's already turning, right,

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Speaker 1: housing sector, the interest rate sensitives, sectors, housing, k packs, UH, investments,

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Speaker 1: even some part of consumer sentiment of turning. But what

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Speaker 1: we have on the hot data side in the US

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Speaker 1: has has come in fairly strong. What we're seeing the

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Speaker 1: labor markets still fairly strong for now, uh, and we're

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Speaker 1: not seeing it turned dramatically. And I think what we

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Speaker 1: have yes as Powers mentioned yesterday, was that you know,

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Speaker 1: the the it's becoming a narrower and narrower path as

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Speaker 1: as the interest rate hikes are setting in, and we

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Speaker 1: have more on the way. Right while we're bring it

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Speaker 1: to four percent now, there is still at least sending

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Speaker 1: five to high the basis points that's being priced in

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Speaker 1: the market. So I think this amount of heights pricing

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Speaker 1: will put for the pressure on economy and and what

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Speaker 1: as we know, sorry, just between us and outside of

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Speaker 1: the world. We can already see pressures outside of of

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Speaker 1: the US. But yeah, absolutely, and a lot of those

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Speaker 1: pressures are coming in living costs, right, and I know

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Speaker 1: you know it here about at rents and there's a

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Speaker 1: long lag there too. The tightness of the labor market too.

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Speaker 1: What does that mean for wages and the impact there.

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Speaker 1: I think what we're seeing in the weight wages that

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Speaker 1: they're kind of bipolar market. What we're seeing is that

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Speaker 1: the top quarter are seeing much less increases than the

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Speaker 1: bottom quarter. And and this is this a function of

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Speaker 1: the COVID reopening, This is a function of the lower

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Speaker 1: participation rate. And but the fact will have to kind

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Speaker 1: of take the wage increases as a whole. UH. Monetary

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Speaker 1: policy UH cannot be that pointed. It's somewhat blunt, and

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Speaker 1: it has to look at we just increases as a whole,

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Speaker 1: and that in itself is still increasing. So we are

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Speaker 1: looking at the global macro picture that we've discussed about.

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Speaker 1: What does that mean then for the outlook for Asia's

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Speaker 1: fixed income markets? I think the pressures of the dollar

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Speaker 1: will will continue to weigh on many parts of Asia.

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Speaker 1: But what we have in Asia is that the infletion picture,

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Speaker 1: while it's rising, is somewhat less aggressive than what we're

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Speaker 1: seeing in the US, which means that central banks do

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Speaker 1: have some room to not go one for one, while

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Speaker 1: they have to hike, they they may not need to

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Speaker 1: go one on one. With the fact we did see

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Speaker 1: I guess a bit of a pivot coming through from

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Speaker 1: the r b A with that twenty five basis point

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Speaker 1: hike and suggestions that they could be starting to slow

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Speaker 1: their pace. Do you see I guess a little bit

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Speaker 1: more of that happening through from some of the central

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Speaker 1: banks in Asia. We've just had the Bank of Philippines

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Speaker 1: give a pretty good forward guidance too, though they have

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Speaker 1: said though that they will be raising by seventy five

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Speaker 1: basis points at their November meeting. M H. I think

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Speaker 1: there's definitely pressures more outside of the US than than

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Speaker 1: in the US, partly because of the way the economies

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Speaker 1: are behaving. The U s economy is still fairly strong

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Speaker 1: in the labor markets and domestic economy, whereas that the

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Speaker 1: rest of the world is feeling more pressures. But what

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Speaker 1: I'll say about Australia and particularly Canada in what we

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Speaker 1: saw on the o C and r b A, are

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Speaker 1: the sensitivities of your housing market to front end rates

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Speaker 1: because their mortgages. Mortgage rates are somewhat shorter, and and

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Speaker 1: that's why they are they're much more sensitive, So I

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Speaker 1: think there are keys by case situations in these as well.

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Speaker 1: And then in Asia we have the two central banks

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Speaker 1: that are certainly not hiking. When we look at the

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Speaker 1: b o J and also the p BOC, it is

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Speaker 1: a holiday in Japan. There is speculation though, or I guess,

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Speaker 1: speculation that we should be on intervention watch here in

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Speaker 1: the wake of that hawkish FED. What happens here when

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Speaker 1: do we see yield curve control potentially unwinding. I think

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Speaker 1: our base case is that in the b J remains

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Speaker 1: fairly determined to to one to kind of maintain where

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Speaker 1: they are, given Japan has been going through many, many

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Speaker 1: years of very low inflation, and then this is their

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Speaker 1: way to kind of get back to where they could

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Speaker 1: be previously. And and I think there's certainly a lot

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Speaker 1: of talk about the governor stepping down and when there's

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Speaker 1: a shift in leadership that might be there might be

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Speaker 1: something that our basically it doesn't change, but I think

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Speaker 1: we have to be prepared for for one thing that's

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Speaker 1: not really being priced in Japan at this point, and

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Speaker 1: you're looking at some of the moves in the currencies

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Speaker 1: to I mean we've been looking at this very sharp

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Speaker 1: appreciation of the Chinese you want and then of course

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Speaker 1: we know that the yen week to tell us why

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Speaker 1: you're going long yen versus C N Y well, I

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Speaker 1: I think there was an idea if we had in

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Speaker 1: mind what would be a sort of a country and

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Speaker 1: trade like like what we said about what we think

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Speaker 1: about B O J. The base cases is that they

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Speaker 1: will maintain the y C C but if, if, if

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Speaker 1: there is a that they go the other way. I

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Speaker 1: think that the end could be an opportunity being long

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Speaker 1: there and and towards what we're seeing in China that

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Speaker 1: the story is highly idiosyncratic. The story around the rein depreciation,

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Speaker 1: if if you look at it on a trade weighted basis,

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Speaker 1: it hasn't hasn't been done especially more way more than

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Speaker 1: what we've seen other parts of Asia. But what we're

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Speaker 1: seeing now in China, the story about the potential flows

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Speaker 1: and outflows, given what we're seeing in recent days, uh

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Speaker 1: that the idea of going long end N Y is

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Speaker 1: is something that's worth considering, just given the idiosyncratic on

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Speaker 1: story of China on one side on flows and also

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Speaker 1: the enterprise sort of a story for yen, and it's

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Speaker 1: a very quick comment on on where would be an

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Speaker 1: attractive place to look at China if we are looking

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Speaker 1: at the reopening theme here too. Yeah, I think China

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Speaker 1: for us at this stage the macro picture, we don't

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Speaker 1: think it was dramatically. We are awaiting for some of

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Speaker 1: the major policy actions to come through into the end

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Speaker 1: of the year. The political shifts and transition have happened.

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Speaker 1: Now we want to kind of wait out for the policies. Alright,

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Speaker 1: great to have you with us. How Chiang One is

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Speaker 1: managing director and head of Asian Fixed Income at Principal

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Speaker 1: Asset Management. On the line from Singapore for us here

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Speaker 1: on Bloomberg Daybreak Asia